The opposition had also promised to improve housing affordability by halving the capital gains tax exemption from 50 to 25 per cent.

“We want first home buyers to be able to get their foot in the door … to get their first place.”

However, Treasurer Josh Frydenberg has used the CoreLogic figures as ammunition to slam Labor’s policies.

“Now is the worst possible time for Labor’s disastrous housing tax — which will ensure anyone who owns their own home will see their house worth less under Labor, and anyone who rents will end up paying more.

“It was a policy that was prepared at a different time, when prices were going up … [but] now prices are coming down.”

The most significant factor behind the falling property market was tighter lending conditions imposed by the regulator, which made it more difficult for people to obtain mortgages.

Banks and lenders had acted far more conservatively than needed to restrict loan approvals. Their loans to interest-only borrowers had fallen to about 16.5 per cent of new lending, despite the banking regulator (APRA) imposing a 30 per cent limit.

In that regard, the Treasurer also urged the banks to “keep [their] books open”.

They have a “social and economic responsibility to ensure affordable, accessible and timely loans to the broader public”, he said.

“It’s in the bank’s interest, the economy’s interest, and certainly it’s in the public’s interest.”

Experts divided

However, opinion is divided on whether Labor’s negative gearing policy will benefit the Australian economy.

Opponents of Labor’s tax changes play down the impact of investors and their tax concessions in driving up property prices — yet they forecast dire consequences if the concessions are reduced.

In addition, UBS’s chief economist is worried about the effect the change would have on the economy.

“My concern would be that if you were to make a material change to tax policy at the same time as banks are tightening lending standards, it could exacerbate what’s already a downturn into something more serious,” he said.

Meanwhile, supporters are reluctant to admit the changes could lower housing prices — while claiming the existing tax arrangements played a major role in the property boom, driving up prices beyond the reach of first home buyers.

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